Tonix Pharmaceuticals Holding Corp. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016; balance-sheet figures compared with December 31, 2015. Tonix is a clinical-stage CNS drug developer with no approved or marketed products and no revenue.
Financial performance and position
| Metric | Q1 2016 | Q1 2015 / prior date |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $10.7 million | $6.8 million |
| General and administrative expense | $3.3 million | $2.9 million |
| Operating loss | $14.0 million | $9.7 million |
| Net loss | $14.0 million; $0.74 per share | $9.7 million; $0.71 per share |
| Net cash used in operating activities | $15.5 million | $9.1 million |
| Cash and cash equivalents | $8.4 million | $19.2 million |
| Marketable securities | $19.1 million | $23.8 million |
| Working capital | $26.7 million | Not stated as a comparable figure |
| Total liabilities | $4.0 million | $6.8 million |
Cash, cash equivalents and marketable securities totaled $27.5 million at quarter-end. The company reported no debt in the presented balance sheet. No meaningful gross margin was reported because there were no sales. Cash used in investing activities was $4.7 million, primarily reflecting $4.8 million of marketable-security maturities, partly offset by equipment purchases. There was no financing cash flow in Q1 2016; Q1 2015 included $29.1 million of net proceeds from a common-stock offering.
Changes versus the prior comparable period
- Net loss increased by $4.3 million, while R&D expense rose 57% to $10.7 million, principally from TNX-102 SL clinical, manufacturing, formulation and development work.
- Operating cash use increased by $6.4 million. The company cited increased manufacturing, preclinical and clinical activity, regulatory costs and payroll.
- Cash and marketable securities declined by $15.5 million from year-end 2015. Current liabilities also fell, from $6.7 million to $3.9 million.
- Weighted-average shares increased to 18.9 million from 13.7 million; reported loss per share was $0.74 versus $0.71.
Programs, outlook and risks
- TNX-102 SL: The lead candidate was in a Phase 3 fibromyalgia trial, AFFIRM, with top-line results expected in Q3 2016. Tonix planned a second Phase 3 fibromyalgia trial in Q2 2016. The Phase 2 AtEase PTSD trial was expected to report top-line results in May 2016. The FDA had agreed to the proposed 30% pain-responder endpoint for the fibromyalgia Phase 3 program and provided CMC guidance for potential fibromyalgia and PTSD NDAs.
- The prior BESTFIT Phase 2b fibromyalgia study showed a positive trend but did not achieve statistical significance on its primary pain analysis; certain secondary analyses, including a 30% responder analysis, were statistically significant. This history underscores clinical-development risk.
- Other pipeline work included TNX-301 for alcohol use disorder and early nonclinical biodefense programs. Management expected R&D expense to increase significantly over the next 12–24 months and said cash outlays could rise substantially over several years.
- Management stated that existing funds were expected to cover operating expenses and ongoing trials for at least 12 months. It also warned that additional financing could be needed; failure to obtain acceptable financing could require reductions or delays to programs. The company had $21.6 million of quantified R&D commitments and $2.0 million of operating-lease obligations.
- After quarter-end, Tonix entered an at-the-market sales agreement allowing up to $15 million of common stock to be sold, subject to a 3% sales commission. Any issuance could dilute existing shareholders.
- All candidates remained investigational. The company had sustained losses and negative operating cash flows since inception; trial delays, safety or efficacy results, regulatory decisions, recruitment, financing needs and commercialization prospects were key risks. No material change to previously disclosed risk factors or material legal proceedings was reported.
- Management concluded disclosure controls were effective. The prior CFO resigned during the quarter and an internal successor was promoted; the filing reported no other material change in internal control over financial reporting.
Important facts for investors to verify
- Subsequent results and timing for AFFIRM and AtEase, and whether the planned second fibromyalgia Phase 3 trial commenced.
- Quarterly cash burn, updated liquidity and runway against the $21.6 million R&D commitments and expected higher development spending.
- Whether and how much stock was sold under the $15 million ATM agreement, and the resulting dilution.
- Clinical-trial outcomes, adverse-event data, FDA requirements and the path, timing and cost of any potential NDA submissions.
- Changes in share count, option and warrant overhang, and any future financing or cost-reduction measures.